Fitch Rates Cobb County, Georgia's $19.6MM GO Refunding Bonds 'AAA'

Business Wire, March 31, 2005

NEW YORK -- Fitch Ratings assigns Cobb County, GA's (the county) $19.6 million general obligation (GO) park and recreation refunding bonds, series 2005, an 'AAA' rating. The bonds are scheduled to sell competitively on or about April 7, pending market conditions. Fitch also affirms the 'AAA' rating on the county's $50.5 million in outstanding GO debt. Bond proceeds will advance refund the outstanding GO park and recreation bonds, series 1996, and provide an estimated present value savings of 4.5% of the refunded par. The Rating Outlook is Stable.

The 'AAA' GO bond rating reflects strong financial management, low debt levels, and a diverse economic base, as well as the county's proximity to Atlanta. Despite the recent planned reduction in fund balance for capital projects and accumulated retained earnings deficit in the county's solid waste disposal enterprise fund, the county's financial position is sound, with ample cushion and expected to remain above its unreserved fund balance policy.

As part of the vibrant Atlanta metropolitan statistical area (MSA), the county exhibits healthy economic diversification and above-average wealth levels. The county's population has grown since 2000 by an estimated 2.5% in 2004, in addition to the 36% growth experienced in the past decade. A diverse group of major corporations and military-related operations provide the majority of private sector employment in the county. The Home Depot headquarters is the county's largest private employer, followed by WellStar Health Services, Inc. and Lockheed Martin Corp. Unemployment rates remain lower than the Atlanta MSA, state, and national rates.

The county's relatively low tax rates, assessed valuation (AV) growth averaging 6% annually in the past five years, and prudent budgeting practices have contributed to a strong financial position. While a portion of the fiscal 2004 fund balance was appropriated for capital projects, year-end results still showed a sound $40.4 million unreserved undesignated fund balance, or 13.2% of spending. The general fund also continues to subsidize the county's solid waste disposal enterprise fund, which reported an estimated $6.1 million operating deficit and $57.1 million accumulated retained earnings deficit. In response, county officials implemented a new business plan in February 2004, including increased tipping fees. However, other measures may still be necessary to reduce the structural gap that is anticipated to always be somewhat subsidized by the general fund. Nonetheless, the unreserved general fund balance is expected to remain strong, above the county's policy of keeping the unreserved general fund balance policy at 1/10th of budgeted expenditures.

Sound capital planning that includes a substantial amount of pay-as-you-go financing and rapid amortization has resulted in very low debt levels. Direct debt per capita is a minimal $327, or 0.3% of total market value. Overall debt, which includes overlapping units, is still low at 0.76% of market value. County officials are considering holding a referendum in September to garner approval to levy a 1% special purpose sales tax for transportation (SPLOST) to finance various capital projects, including a new jail, a new courthouse, replacement of the countywide 800-mhz radio system, and transportation improvement programs. If the 2005 SPLOST is not approved, county officials will consider other funding methods, including the issuance of GO debt, which is afforded by the county's existing low tax rate and debt ratios.